- EUR/USD faces challenges due to the growing geopolitical tension in the Middle East.
- Israel and Iran continue to attack each other, challenging international so -called diplomacy and de -escalated.
- The US Fed is expected to maintain its stable policy rate in the range of 4.25% -4.50% on Wednesday.
EUR/USD extends its losses per second consecutive session, operating around 1,1540 during the Asian hours of Monday. The torque depreciates as the US dollar (USD) gains ground in the middle of a growing demand for safe refuge as geopolitical tensions intensify in the Middle East.
Israel began attacks on Iranian nuclear facilities and missile factories on Friday. Iran replied with an attack on Israel on Sunday night, with an explosion seen in the coastal city of Haifa. Israel continued to attack military objectives in Iran, despite international so -called diplomacy and de -escalated, according to CNN.
In addition, the Iranian half Mehr News reported that Iran has begun the fourth phase of the operation against Israel on Sunday. Iranian officials stressed that they would respond “firmly to any adventurism” by Israel.
On Friday, the University of Michigan (UOM) showed that the consumer’s feeling index rose to 60.5 in June from 52.2 previously. This reading exceeded the 53.5 market consensus. The US Federal Reserve is expected to maintain its policy rate without changes in the range of 4.25% –4.50% in its next decision on Wednesday. However, operators now expect a 25 basic point rate cut for September.
However, the negative side of the EUR/USD torque could be contained since the euro (EUR) receives support from an increase in the feeling around the European Central Bank (ECB) to pause its flexibility cycle to assess the impact of the new US tariffs.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AU (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
